The commission charged by real estate brokers for closing property deals has jumped by half from two to three per cent and could rise by more than double to five per cent next year, according to property agents in Dubai.
Brokers previously charged buyers and sellers one per cent of the property value each. The rise follows a claimed 60 per cent increase in costs for brokerage firms last year.
"A lot of companies have already increased their commission," Amr Soliman, Chief Executive of Blu International Realty for the Mena region, told Emirates Business.
"So we have raised our fees chargeable to the buyer and seller to three per cent – 1.5 per cent each from the buyer and seller. This rise is not a directive from the Real Estate Regulatory Agency (Rera) as it does not set commission rates.
"In the brokerage market if one agency increases commission rates, others will follow. The industry is healthy and has grown at an average rate of 40 to 50 per cent in terms of the volume of deals done in the past two years. The opportunities, as you see, are tremendous for a broker in the market."
The increase in costs has been caused by rent escalation.
"Today 75 per cent of the income earned of a brokerage company goes towards costs," added Soliman, who employs 15 agents.
Basel Al Kasem of Basel Real Estate Brokers said: "The percentage of the brokerage commission between the seller and the company can vary. For an end-user or seller our commission varies between one and two percentage of the property value. If the seller is a developer the percentage for us varies from two to four per cent depending on the volume of business.
"The market is huge and we deal with only select developers. I work with less than 10 developers, but I have excellent relations with them – built up over the years."
Some agents are looking to Rera to further improve standards in the brokerage industry. Cluttons has six registered agents with more waiting to be registered with Rera.
"We look forward to Rera introducing further regulation in respect of memorandum of understanding agreements for sales, lease contracts and general procedures," said Cluttons Partner Michael Grant.
"And the ratio of salary to commission needs to be set by Rera in order to promote team players and commitment to the brokerage industry and provide a transparent and professional service," he said.